In a case not covered by the priority rules in Chapter 9a, Uniform Commercial Code – Secured Transactions, or the rules stated in Subsection (3), an action based on an adverse claim to a financial asset or securityentitlement, whether framed in conversion, replevin, constructive trust, equitablelien, or other theory, may not be asserted against a person who purchases a security entitlement, or an interest therein, from an entitlement holder if the purchaser gives value, does not have notice of the adverse claim, and obtains control.
Terms Used In Utah Code 70A-8-510
Adverse claim: means a claim that a claimant has a property interest in a financial asset and that it is a violation of the rights of the claimant for another person to hold, transfer, or deal with the financial asset. See Utah Code 70A-8-101
Entitlement: A Federal program or provision of law that requires payments to any person or unit of government that meets the eligibility criteria established by law. Entitlements constitute a binding obligation on the part of the Federal Government, and eligible recipients have legal recourse if the obligation is not fulfilled. Social Security and veterans' compensation and pensions are examples of entitlement programs.
Entitlement holder: means a person identified in the records of a securities intermediary as the person having a security entitlement against the securities intermediary. See Utah Code 70A-8-101
Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
Financial asset: except as otherwise provided in Section 70A-8-102, means:
(A)
a security;
(B)
an obligation of a person or a share, participation, or other interest in a person or in property or an enterprise of a person, which is or is of a type, dealt in or traded on financial markets, or which is recognized in any area in which it is issued or dealt in as a medium for investment; or
(C)
any property that is held by a securities intermediary for another person in a securities account if that securities intermediary has expressly agreed with the other person that the property is to be treated as a financial asset under this chapter. See Utah Code 70A-8-101
Lien: A claim against real or personal property in satisfaction of a debt.
a person, including a bank or broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity. See Utah Code 70A-8-101
Security: except as otherwise provided in Section 70A-8-102, means an obligation of an issuer or a share, participation, or other interest in an issuer or in property or an enterprise of an issuer that:
(i)
is represented by a security certificate in bearer or registered form, or the transfer of which may be registered upon books maintained for that purpose by or on behalf of the issuer;
(ii)
is one of a class or series or by its terms is divisible into a class or series of shares, participations, interests, or obligations; and
(iii)
(A)
is, or is of a type, dealt in or traded on securities exchanges or securities markets; or
(B)
is a medium for investment and by its terms expressly provides that it is a security governed by this chapter. See Utah Code 70A-8-101
Security entitlement: means the rights and property interest of an entitlement holder with respect to a financial asset specified in 5. See Utah Code 70A-8-101
Uniform Commercial Code: A set of statutes enacted by the various states to provide consistency among the states' commercial laws. It includes negotiable instruments, sales, stock transfers, trust and warehouse receipts, and bills of lading. Source: OCC
(2)
If an adverse claim could not have been asserted against an entitlement holder under Section 70A-8-502, the adverse claim cannot be asserted against a person who purchases a security entitlement, or an interest therein, from the entitlement holder.
(3)
In a case not covered by the priority rules in Chapter 9a, Uniform Commercial Code – Secured Transactions, a purchaser for value of a security entitlement, or an interest therein, who obtains control has priority over a purchaser of a security entitlement, or an interest therein, who does not obtain control. Except as otherwise provided in Subsection (4), purchasers who have control rank according to priority in time of:
(a)
the purchaser’s becoming the person for whom the securities account, in which the security entitlement is carried, is maintained, if the purchaser obtained control under Subsection 70A-8-105(4)(a);
(b)
the securities intermediary‘s agreement to comply with the purchaser’s entitlement orders with respect to security entitlements carried or to be carried in the securities account in which the security entitlement is carried, if the purchaser obtained control under Subsection 70A-8-105(4)(b); or
(c)
if the purchaser obtained control through another person under Subsection 70A-8-105(4)(c), the time on which priority would be based under this subsection if the other person were the secured party.
(4)
A securities intermediary as purchaser has priority over a conflicting purchaser who has control unless otherwise agreed by the securities intermediary.
